Decision-making: Joe Derhake

CEO and founder of Partner Engineering and Science, Inc. (Hot Firm #9 for 2018), a 700-plus person engineering and environmental due diligence consulting firm.

By Liisa Andreassen Correspondent

“There’s no boundary between entry-level and senior-level staff,” Derhake says. “Good ideas come from all over and we’re constantly reaching into the organization to ask and listen for those ideas.”

A CONVERSATION WITH JOE DERHAKE.

The Zweig Letter: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around?

Joe Derhake: Our mission is internal – to be the best home for talented professionals in our field. Our core strength comes from those who are a part of our team, and we believe it’s imperative that we grow from within whenever possible. To fulfill this mission, we provide competitive benefits, opportunities for training and certification for vertical advancement, and a supportive, collaborative peer environment.

For example, three times a year we fly recent new hires to our headquarters for a New Hire Summit for training, and more importantly, to get connected to each other, senior leaders, the culture, and our mission. We also have a robust “Partner University” training program that includes cross-training and career advancement events throughout the year, as well as more than 400 on-demand training assets. We encourage mentoring at all levels.

Since we spend so many of our waking hours at work, we try to foster an environment where people want to work hard together, and then celebrate together. Each office is empowered to do different things to inspire people to have fun. For example, birthday and holiday celebrations, wellness programs like yoga, weekly fruit day, and Habitat for Humanity build day are all things that bring people together. Peers give each other awards and recognition each month for teamwork, expertise, accountability, and other values.

There are also a few corporate philosophies that I think shape our culture into a place people want to stay. They include:

• Accessible leadership. There’s no boundary between entry-level and senior-level staff. Good ideas come from all over and we’re constantly reaching into the organization to ask and listen for those ideas.
• Profits are important, but in a lot of ways we put people before profits.
• We have a “no jerks” rule for hiring and firing.

It’s a constant effort, but it’s working. Partner has a very low turnover rate compared to industry norms – maybe by half.

TZL: Do you tie compensation to performance for your top leaders?

JD: Yes. I try to make incentivized compensation nurture teamwork. However, I think it’s sometimes possible to have the opposite effect if you aren’t careful.

TZL: What actions do you take to address a geographic office or specific discipline in the event of non-performance?

JD: I try to give constructive feedback and then have the patience to wait for improvement. Sometimes, the issue comes down to fit, so we need to redefine roles.

TZL: Have you ever closed an underperforming office? If so, tell us about it.

JD: Attracted by big dollars, we tried to get into contracting. The dollars were big, but we struggled with operations and hiring; ultimately, we failed. We are better at managing engineering and consulting businesses.

TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s?

JD: There are three ways to become a principal at Partner Engineering and Science, Inc.:

1. Develop a book of business.
2. Be a technical expert in your practice with exceptional ratings year after year, while also contributing in some way to growth.
3. Be a corporate executive with exemplary performance.

We nominate 12 people for principal positions and then their peers get to vote for which seven make it. This creates a process where every would-be principal needs to maintain a good reputation with management, as well as their peers.

TZL: Internal transition is expensive. How do you “sell” this investment opportunity to your next generation of principals? How do you prepare them for the next step?

JD: Our model gives principals stock options in more of the dot-com model. The options/stock is reasonably liquid, as we are a privately-traded company. On trade day, stockholders and option holders can cash in for any reason.

TZL: When did you have the most fun running your firm, and what were the hallmarks of that time in your professional life?

JD: Now. I enjoy entrepreneurship. When we started as a team of nine, the challenge was surviving the Great Recession, building strong relationships, attracting clients, and laying down the foundation for our firm. That was a hard and exciting time, but I wouldn’t exactly describe it as “fun.” Now, we have the resources and staff to do entrepreneurship the right way! And it’s working. We’ve had a couple misses, but many more wins. Twelve of our most successful practices started from one person’s entrepreneurial idea and efforts.

TZL: Describe the challenges you encountered in building your management team over the lifetime of your leadership? Have you ever terminated or demoted long-time leaders as the firm grew? How did you handle it?

JD: In the past five years, we’ve been adding one person from the outside to the executive board per year. I’ve been able to add outside engineering professionals with success as I have known these people for a long time – even though they were competitors. I’ve struggled to hire functions outside of my network, positions like a CIO. I have relied on recruiters for these types of hires with mixed results.

TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO?

JD: Decision-making.

TZL: What happens to the firm if you leave tomorrow?

JD: It would be fine. All of the original founders of the company are still working here today, a decade later – that speaks to the commitment and dedication of Partner’s executives to its continued success. I think three people in our C-suite could do my job.

TZL: With technology reducing the time it takes to complete design work, how do you get the AEC industry to start pricing on value instead of hours?

JD: We do a lot of lump sum work – we win when we can template our designs and do them over and over again. New challenges and original designs are great for learning but not for profit – of course, learning is important, too.

TZL: If the worker shortage continues, do you see wages increasing to encourage more talent to enter the AEC space, or will technology be used to counter the reduced workforce?

JD: We need to use technology to do everything better, faster and cheaper. We invest in in-house custom solutions and have a room full of programmers innovating and testing solutions in real time.

TZL: The seller-doer model is very successful, but with growth you need to adapt to new models. What is your program?

JD: The seller-doer model is only about one third of our business development team. The rest of our BD staff are pure sellers.

TZL: Diversity and inclusion is lacking. What steps are you taking to address the issue?

JD: Five of the first nine principals were women and Partner is a majority women-owned business. Our two highest paid employees are women – I am number three. We’ve always been a gender-balanced meritocracy and have not focused on any gender centric hiring, but starting out very female has propagated that culture. If we were a case study, the conclusion would be that talented females are more interested in joining a very co-ed firm like ours rather than trying to pioneer in some firm where management has been a boy’s club for 50 years.

TZL: Tell us about the last time you named a new principal from outside the firm.

JD: We would consider a person joining the firm as a principal if we were very familiar with them, knew them via another partner, and they brought in significant business.